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220 matches for " jobless":
The jobless claims numbers today likely will mark the end of the calm before the storm effect, even though the data cover the week ended September 1, and Harvey hit on August 26.
On the face of it, the upturn in initial jobless claims since late September appears to signal a softening in the economy.
The recent jobless claims numbers have been spectacularly good, with the absolute level dropping unexpectedly in the past two weeks to a 43-year low. The four-week moving average has dropped by a hefty 14K since late August.
The 62K jump in jobless claims for the week ended September 2 is a hint of what's to come. Claims usually don't surge until the second week after major hurricanes, because people have better things to do in the immediate aftermath, so we are braced for a further big increase next week.
We have learned over the years not to become too excited in the face of swings in the jobless claims numbers, even when the movement appears to persist for a month or two.
In one line: Trade deficit has stabilized, provided the China talks don't fall apart.
In one line: The calm before the export storm?
In one line: Decent July means net foreign trade unlikely to be a big drag on Q3 GDP growth.
The pace of layoffs might be picking up. Our first chart looks pretty convincing, but it's much too soon to know for sure. The claims data from mid-December through late January are subject to serious seasonal adjustment problems, partly because Christmas falls on a different day of the week each year and partly because the exact timing of post-holiday layoffs varies from year-to-year.
Yesterday's consumer sentiment data provided further evidence of a strengthening French economy, amid signs of cracks in the otherwise solid German economy.
In one line: The trend is back to the cycle low.
In one line: Solid, but it won't last.
In one line: A correction; the trend is stable, for now.
In one line: Claims noise likely insignificant; hefty upward revisions to Q1 capex.
In one line: Philly surge looks great, but it's not definitive.
In one line: The trend remains stable and very low.
In one line: Trade will be a small drag on Q2 GDP growth.
In one line: Expect a rebound in the October core; too late to prevent a Fed easing this month.
In one line: Little sign of the feared trade hit on Q2 GDP growth, so far.
In one line: Looks bad, but the trend is not--yet--running at 0.3% per month.
In one line: Policy uncertainty is not lifting layoffs.
Japan's headline jobless rate edged up to 2.8% in December, from 2.7% in November, but the increase was negligible, with the rate moving to 2.76% from 2.74%.
We were pretty sure that the underlying trend in jobless claims had bottomed, in the high 230s, before the hurricanes began to distort the data in early September.
Leading indicators all point to a solid August payroll number. Survey-based measures of the pace of hiring signal a 200K-plus increase, and jobless claims--a proxy for the pace of gross layoffs--are at a record low as a share of the workforce.
Today brings an array of economic data, including the jobless claims report, brought forward because July 4 falls on Thursday.
After three straight lower-than-expected jobless claims numbers, we have to consider, at least, the idea that maybe the trend is falling again. This would be a remarkable development, given that claims already are at their lowest level ever, when adjusted for population growth, and at their lowest absolute level since the early 1970s.
The weekly jobless claims numbers tend to be choppy around the turn of the year, and our take on the seasonal adjustments points to a clear increase in today's report, for the week ended January 11, even without the impact of the government shutdown.
The jobless rate fell back to 2.8% in June after the surprise rise to 3.1% in May. This drop takes us back to where we were in April before voluntary unemployment jumped in May.
We're expecting a hefty increase in February payrolls today, but even a surprise weak number likely wouldn't prevent a rate hike next week. The trends in all the private sector employment surveys are strong and improving, and jobless claims have dropped to new lows too, though we think that's probably less important than it appears.
All the fundamentals point to a very strong payroll number for May. The NFIB hiring in tentions index, the best single leading indicator of payrolls five months ahead, signalled back in December that May employment would rise by about 300K. The NFIB actual net hiring number, released yesterday, is a bit less bullish, implying 250K, but the extraordinarily low level of jobless claims, shown in our first chart, points to 300K. Finally, the ISM non-manufacturing employment index suggests we should be looking for payrolls to rise by about 260K. Our estimate is 280K.
We don't directly plug the ADP employment data into our model for the official payroll number. ADP's estimate is derived itself from a model which incorporates lagged official payroll data, because payrolls tend to mean-revert, as well as macroeconomic variables including oil prices, industrial production and jobless claims -- and actual employment data from firms which use ADP's payroll processing services.
Behind all the talk of slowdowns and Fed pauses, we see no sign that the labor market is loosening beyond a very modest uptick in jobless claims, and even that looks suspicious.
Initial jobless claims, a sign of the pace of layoffs, dropped to a seasonally-adjusted 265,000 in the week ending Jan 24, a hefty decline of 43,000 from the prior week's slightly upwardly revised level of 308,000
Chief US Economist Ian Shepherdson on today's Inital Jobless Claims data
The question of what's really happening to the pace of layoffs is still unanswered, despite the apparent upturn over the past couple of months. The weekly jobless claims numbers are only just emerging from the fog of the usual holiday season chaos. The pattern of pre-holiday hiring and post-holiday layoffs is broadly the same each year, but Christmas and New Year's Day fall on a different day each year, making seasonal adjustment difficult.
Chief U.S. Economist Ian Shepherdson on U.S. Jobless Claims
Chief U.S. Economist Ian Shepherdson on U.S. Unemployment
The third estimate of first quarter GDP growth, due today, will not be the final word on the subject. Indeed, there never will be a final word, because the numbers are revised indefinitely into the future.
The disappearance from the FOMC statement of any reference to global risks, which first appeared back in September, was both surprising and, in the context of this cautious Fed, quite bold. After all, one bad month in global markets or a reversal of the jump in the latest Chinese PMI surveys presumably would force the Fed quickly to reinstate the global get-out clause. So, why drop it now?
After three straight 1.3% month-to-month increases in core capital goods orders, we are becoming increasingly confident that the upturn in business investment signalled by the NFIB survey is now materializing.
We're braced for a hefty downside surprise in today's durable goods orders numbers, thanks to a technicality.
Three of today's economic reports, all for December, could move the needle on fourth quarter GDP growth. Ahead of the data, we're looking for growth of 1.8%, a bit below the consensus, 2.2%, and significantly weaker than the Atlanta Fed's GDPNow model, which projects 2.8%.
Economic activity in Mexico during the past few months has been relatively resilient, as external and domestic threats appear to have diminished.
The Fed is on course to hike again in December, with 12 of the 16 FOMC forecasters expecting rates to end the year 25bp higher than the current 2-to-21⁄4%; back in June, just eight expected four or more hikes for the year.
Inflation in Mexico remains relatively sticky, limiting Banxico's capacity to adopt a more dovish approach, despite the subpar economic recovery.
We have been waiting a long time to see signs that business investment spending is becoming less reliant on movements in oil prices.
Net foreign trade was a drag on GDP growth in the second quarter, subtracting 0.7 percentage points from the headline number.
Our base case forecast has core PCE inflation at 1.9% from November 2018 through July this year.
We're fully expecting to see a hit to September payrolls from Hurricane Florence, which struck during the employment survey week.
The FOMC delivered no big surprises yesterday, but seemed keen to make it clear that policymakers are sticking to their core views, despite the slowdown in growth in the first quarter. Unlike the March statement, yesterday's note pointed out that the slowdown came in the winter months, though it did not directly blame the weather for the sluggishness in growth.
Friday's advance GDP data provided the first solid evidence of a Q1 slowdown in the euro area economy.
The unemployment rate hit its post-1970 low in April 2000, at the peak of the first internet boom, when it nudged down to just 3.8%. The low in the next cycle, first reached in October 2006, was rather higher, at 4.4%.
ADP's report that September private payrolls rose by 135K was slightly better than we expected, but not by enough to change our 150K forecast for tomorrow's official report.
Speeches by Chair Yellen and Vice-Chair Fischer give the two most important Fed officials the perfect platform today to signal to markets whether rates will rise this month.
The stock market loved Fed Chair Powell's remarks on the economy yesterday, specifically, his comment that rates are now "just below" neutral.
With almost two thirds of the nominal data for the third quarter now available, we can make a stab at the contribution of inventories to real GDP growth.
Japan's unemployment rate edged back up to 2.5% in February after the drop in January to 2.4%.
Nothing is done until it's done, and, in the case of Sino-U.S. trade talks, even if a deal is reached, the new normal is that tensions will be bubbling in the background.
The recovery in existing home sales appears to have stalled, at best.
The hawks clearly tried hard to persuade their more nervous colleagues to raise rates yesterday. In the end, though, they had to make do with shifting the language of the FOMC statement, which did not read like it had come after a run of weaker data.
The trend rate of increase in private payrolls in the months before Hurricane Katrina in 2005 was about 240K per month.
Today brings a wave of data, some brought forward because of Thanksgiving. We are most interested in the durable goods orders report for October, which we expect will show the upward trend in core capital goods orders continues.
The most striking feature of the Fed's new forecasts is the projected overshoot in core PCE inflation at end-2019 and end-2020, which fits our definition of "persistent".
New home sales are much more susceptible to weather effects -- in both directions -- than existing home sales. We have lifted our forecast for today's February numbers above the 575K pace implied by the mortgage applications data in recognition of the likely boost from the much warmer-than-usual temperatures.
New home sales performed better during the winter than any other indicator of economic activity. At least, we think they did. The mar gin of error in the monthly numbers is enormous, typically more than +/-15%.
We expect the Mexican economy to continue growing close to 2% year-over-year in 2019, driven mainly by consumption, but constrained by weak investment, due to prolonged uncertainty related to trade.
If the recovery in existing homes hadn't been interrupted by the taper tantrum, in the spring of 2013, sales by now would likely be running at an annualized rate in excess of 6M. The rising trend in sales from late 2010 through early 2013 was strong and stable, as our first chart shows, but the decline was steep after the Fed signalled it would soon slow the pace of QE, and it was made temporarily worse by the severe late fall and early winter weather.
A couple of Fed speakers this week have described the economy as being at "full employment". Looking at the headline unemployment rate, it's easy to see why they would reach that conclusion.
Japan's domestic demand has underperformed in the last three quarters, while exports were strong last year but weakened--due to temporary factors--in Q1.
New home sales have tended to track the path of mortgage applications over the past year or so, with a lag of a few months. The message for today's January sales numbers, show in our next chart, is that sales likely dipped a bit, to about 525K.
The alarming-looking decline in core capital goods orders since late 2014 has been substantially due, in our view, to the rollover in investment in the mining sector. But the 29% jump in the number of oil rigs in operation, since the mid-May low, makes it clear that the collapse is over.
Neither of the major economic reports due today will be published on schedule.
The FOMC minutes confirmed that most FOMC members were not swayed by the weak-looking first quarter GDP numbers or the soft March core CPI. Both are considered likely to prove "transitory", and the underlying economic outlook is little changed from March.
We see significant upside risk to today's headline durable goods orders numbers for April.
Fed Chair Yellen speaks at Jackson Hole today, at 10:00 Eastern. Her topic is billed as "financial stability", but that does not necessarily preclude remarks on the outlook for the economy and policy.
If you wanted to be charitable, you could argue that the downturn in the rate of growth of core durable goods orders in recent months has not been as bad as implied by the ISM manufacturing survey.
The nominal value of orders for non-defense capital equipment, excluding aircraft, fell by 3.4% last year. This was less terrible than 2015, when orders plunged by 8.4%, but both years were grim when compared to the average 7.5% increase over the previous five years.
It's going to be very hard for Fed Chair Powell's Jackson Hole speech today to satisfy markets, which now expect three further rate cuts by March next year.
Korea's 20-day export growth came in weaker than we anticipated earlier this week. Granted, year-over- year growth rebounded to 14.8% in May, from 8.3% in April.
All eyes will be on the core PCE deflator data today, in the wake of the upside surprise in the January core CPI, reported last week. The numbers do not move perfectly together each month, but a 0.2% increase in the core deflator is a solid bet, with an outside chance of an outsized 0.3% jump.
The rebound in the ISM non-manufacturing index in February was in line with our forecast, but behind the strong headline, the employment index dropped to an eight-month low.
Our core view on the May payroll number remains that the single most likely cause of the unexpectedly modest increase is a seasonal adjustment error, triggered when the survey is conducted early in the month.
The latest iteration of the Atlanta Fed's GDPNow model of second quarter GDP growth shows the economy expanding at a 4.5% annualized rate.
ADP's report of a 235K increase in private payrolls in February is not definitive evidence of anything, but it is consistent with the idea that labor demand remains very strong.
The Fed today will do nothing to rates and won't materially change the language of the post-meeting statement.
We're hearing a good deal of speculation about the dotplot after next week's FOMC meeting, with investors wondering whether the median dot will rise in anticipation of the increased inflation threat posed by substantial fiscal loosening under the new administration. We suspect not, though for the record we think that higher rate forecasts could easily be justified simply by the tightening of the labor market even before any stimulus is implemented.
If the Fed needed further encouragement to raise rates next month, it arrived Friday in the form of solid jobs numbers, a new cycle low for the broad unemployment rate, and a new cycle high for wage growth.
The startling November international trade numbers, released yesterday, greatly improve the chance that the fourth quarter saw a third straight quarter of 3%- plus GDP growth.
We have argued frequently that the ADP employment report is not a reliable advance payroll indicator--see our Monitor of May 4, for example-- so for now we'll just note that it is generated by a regression model which includes a host of nonpayroll data and the official jobs numbers from the previous month. It is not based solely on reports from employers who use ADP for payroll processing, despite ADP's best efforts to insinuate that it is.
We've been hearing a good deal about the slowdown in the rate of growth of consumer credit in recent months, and with the April data due for release today, it makes sense now to reiterate our view that the recent numbers are no cause for alarm.
We argued yesterday that the steep declines in the ISM surveys in August, both manufacturing and services, likely were one-time events, triggered by a combination of weather events, seasonal adjustment issues and sampling error. These declines don't chime with most other data.
Total real inventories rose at a $48.7B annualized rate in the fourth quarter, contributing 1.0 percentage points to headline GDP growth. Wholesale durable goods accounted for $34B of the aggregate increase, following startling 1.0% month-to-month nominal increases in both November and December. The November jump was lead by a 3.2% leap in the auto sector, but inventories rose sharply across a broad and diverse range of other durables, including lumber, professional equipment, electricals and miscellaneous.
Convention dictates that we lead with yesterday's Fed meeting, but it's hard to argue that it really deserves top billing.
The FOMC minutes showed both sides of the hike debate are digging in their heels. As the doves are a majority--rates haven't been hiked--the tone of the minutes is, well, a bit do vish. But don't let that detract from the key point that, "Most participants continued to anticipate that, based on their assessment of current economic conditions and their outlook for economic activity, the labor market, and inflation, the conditions for policy firming had been met or would likely be met by the end of the year." Confidence in this view has diminished among "some" participants, however, worried about the impact of the strong dollar, falling stock prices and weaker growth in China on U.S. net exports and inflation.
Inventories subtracted 1.3 percentage points from headline GDP growth in the second quarter and were by far the biggest constraint on the economy. This was the fifth straight drag from inventories, but it was more than twice the average hit over the previous year.
Today brings only the preliminary Michigan consumer sentiment data for January so we want to take some time to look at how recent changes to Medicare Part B premiums, which cover doctors' fees, are likely to affect inflation over the next few months.
Britain's housing market appears to be going from bad to worse.
We'd be quite surprised if the headline payroll number today turned out to be far from the consensus, 205K, or our forecast, 225K.
The rollover in bank lending to commercial and industrial companies probably is over. On the face of it, the slowdown has been alarming, with year-over-year growth in the stock of lending slowing to just 2.6% in April, from a sustained peak of more than 10% in the early part of last year.
The collapse in capital spending in the oil sector last year was the biggest single drag on the manufacturing sector, by far. The strong dollar hurt too, as did the slowdown in growth in China, but most companies don't export anything. Capex has fallen in proportion to the drop in oil prices, so our first chart strongly suggests that the bottom of the cycle is now very near.
We expected a consensus-beating ADP employment number for February, but the 298K leap was much better than our forecast, 210K. The error now becomes an input into our payroll model, shifting our estimate for tomorrow's official number to 250K; our initial forecast was 210K.
We're sticking to our 220K forecast for today's official payroll number, despite the slightly smaller-than- expected 179K increase in the ADP measure of private employment.
Over the past six months, payroll growth has averaged exactly 150K. Over the previous six months, the average increase was 230K. And in the six months to August 2015--a fairer comparison, because the fourth quarter numbers enjoy very favorable seasonals, flattering the data--payroll growth averaged 197K.
Today's wave of economic reports are all likely to be strong. The most important single number is the increase in real consumers' spending in July, the first month of the third quarter.
Yesterday's advance CPI data in Germany suggest that inflation fell slightly in August.
We're maintaining our estimate of Mexico's Q2 GDP growth, due today, namely a 0.2% year- over-year contraction, in line with a recent array of extremely poor data.
On the face of it, the February consumer spending data, due today, will contradict the upbeat signal from confidence surveys. The dramatic upturn in sentiment since the election is consistent with a rapid surge in real consumption, but we're expecting to see unchanged real spending in February, following a startling 0.3% decline in January.
Mexico's data over the last few weeks have confirmed our view that private consumption remains the key driver of the current economic cycle. Solid economic fundamentals, thanks to stimulative monetary policy and structural reforms, have supported the domestic economy in recent quarters. Falling inflation has also been a key driver, slowing to 2.5% by mid-September, a record low, from an average of 4% during 2014.
Economic data released last week underscored that Brazil's economic recovery is continuing; the effect of recent bold rate cuts and improving domestic fundamentals will further support the gradual recovery of the labour market.
Yesterday's November inflation reports from Germany and Spain suggest that today's data for the Eurozone as a whole will undershoot the consensus.
Political volatility is a recurrent theme in Brazil. Six members of President Michel Temer's cabinet resigned last Friday due to allegations of conflict of interest on a construction deal. Rumours that President Temer was involved in the affair stirred up market volatility and revived political risk concerns
Inflation pressures remain under control in most LatAm economies, allowing central banks to keep interest rates on hold, despite the challenging external environment.
For analysts with a broadly positive view of the U.S. economy, it is tempting to argue that the slowdown in payroll growth this year reflects supply constraints, as the pool of qualified labor dries up.
The ADP employment report suggests that the hit to payrolls from Hurricane Florence was smaller than we feared, so we're revising up our forecast for the official number tomorrow to 150K, from 100K.
The shock of the weak May payroll report means that the June numbers this week will come under even greater scrutiny than usual. We are not optimistic that a substantial rebound is coming immediately. The headline number will be better than in May, because the 35K May drag from the Verizon strike will reverse.
The pushback from within the President's own party against the proposed tariffs on Mexican imports has been strong; perhaps strong enough either to prevent the tariffs via Congressional action, or by persuading Mr. Trump that the idea is a losing proposition.
The renewed slide in oil prices in recent weeks will crimp capital spending, at the margin, but it is not a macroeconomic threat on the scale of the 2014-to-16 hit.
Labor demand appears to have remained strong through August, so we expect to see a robust ADP report today.
The ADP employment report for September showed private payrolls rose by 135K, trivially better than we expected.
Chile's unadjusted unemployment rate fell to 7.1% in July-to-September, from 7.3% in June-to-August, but it was up from 6.7% in September last year.
We have been telling an upbeat story about the EZ economy in recent Monitors, emphasizing solid services and consumers' spending data.
We set out in detail yesterday, here, why we think the official payroll number today will be better than the 129K ADP reading; we look for 160K.
Markets and the commentariat seemed not to like the April ADP employment report yesterday but we are completely indifferent. We set out in detail in yesterday's Monitor the case for expecting a below consensus ADP reading--in short, the model used to generate the number includes lagging official data, some of which were hugely depressed by the early Easter--so it does not change our 200K forecast for tomorrow's official number.
Reporting on the German labour market has been like watching paint dry in this expansion, but yesterday's data were a stark exception to this rule.
The Fed yesterday acknowledged clearly the new economic information of recent months, namely, that first quarter GDP growth was "solid", with Chair Powell noting that it was stronger than most forecasters expected.
The downside surprise in the November core CPI, which rose by 0.1%, a tenth less than expected, was due entirely to an unexpected 1.3% drop in apparel prices. This alone subtracted 0.05% from the core, but we think the chance of a reversal in December is quite high.
The announcement, late Tuesday, that the administration plans to impose 10% tariffs on some $200B-worth of imports from China raises the prospect of a substantial hit to the CPI.
The April CPI report today will be watched even more closely than usual, after the surprise 0.12% month-to-month fall in the March core index. The biggest single driver of the dip was a record 7.0% plunge in cellphone service plan prices, reflecting Verizon's decision to offer an unlimited data option.
As far as we can tell, most forecasters expect the impact of fiscal stimulus this year to be gradual, with perhaps most of the boost to growth coming next year. At this point, with no concrete proposals either from the new administration or Congress, anything can happen, and we can't rule out the idea of a slow roll-out of tax cuts and spending increases.
You might remember that the December retail sales report surprised significantly to the downside, thanks to the impact of falling gasoline prices. The data are reported in nominal dollars, not volumes, so falling prices depress the numbers.
We'd be surprised to see a repeat today of August's very modest 0.08% increase in the core CPI.
The month-to-month core CPI numbers in March were consistent, in aggregate, with the underlying trend.
The sluggishness of consumers' spending and business investment in the first quarter means that hopes of a headline GDP print close to 2% rely in part on the noisier components of the economy, namely, inventories and foreign trade.
Sentiment in the French business sector ended this year on a high. The headline manufacturing index fell slightly to 112 in December, from an upwardly-revised 113 in November, but the aggregate sentiment gauge edged higher to a new cycle high of 112.
It's pretty easy to dismiss back-to-back 0.3% increases in the core CPI, especially when they follow a run of much smaller gains.
Now that the run of unfavorable base effects in the core CPI--triggered by five straight soft numbers last year--is over, we're expecting little change in the year- over-year rate through the remainder of this year.
We argued earlier this week that the data on the consumer economy are likely to be rather stronger than the industrial numbers.
In yesterday's Monitor we set out the risk that accelerating wages will force the Fed to raise rates more quickly than expected, but we didn't have space to address the underlying premise of this story, namely, the idea that inflation is largely a cost-push phenomenon. From the perspective of fixed income investors, it might not seem to matter whether this is a realistic description of the inflation process, because Fed Chair Yellen believes it wholeheartedly, and her hands are on the levers of monetary policy.
It would not be fair to describe the FOMC as gridlocked, because that would imply no clear way out of the current position. Members' views of the risks to the economy, the state of the labor market, and the degree of inflation risk are all over the map, and the chance of a broad consensus emerging any time soon is slim.
Core inflation probably will remain close to June's 2.3% rate for the next few months.
Whatever happened to consumers' sentiment in March, the level of University of Michigan's index will be very high, relative to its long-term average.
China's October activity data showed signs of the infrastructure stimulus machine sputtering into life. Consensus expectations appear to hold out for a continuation into November, but we think the numbers will be disappointing.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
French industrial production data surprised to the upside yesterday. Output rose 0.1% month-to-month in September, a solid gain following an upwardly-revised 1.7% rise in August, and also higher than the consensus, forecast for a 0.4% fall. The details, however, were less upbeat than the headline. Transport equipment fell, as expected, following production being pushed forward ahead of the Summer holidays. But this story was overshadowed by a 22.5% month-to-month jump in oil refining-- included in manufacturing--as refineries resumed full production following maintenance over the summer.
The first of this week's two July inflation reports, the PPI, will be released today. With energy prices dipping slightly between the June and July survey dates, the headline should undercut the 0.2% increase we expect for the core by a tenth or so.
The continued modest rate of increase in unit labor costs makes it hard to worry much about the near-term outlook for core inflation.
The latest batch of FOMC speakers yesterday, together with the December minutes--participants said "the committee could afford to be patient about further policy firming"--offered nothing to challenge the idea, now firmly embedded in markets, that the next rate hike will come no sooner than June, if it comes at all.
Mexico's economy grew 1.0% quarter-on-quarter in Q3, the fastest pace since 2014, following a 0.2% contraction in Q2, according to the preliminary report published yesterday.
Chile's central bank left its policy rate on hold last Friday at 3.0%, in line with market expectations, amid easing inflationary pressures and a struggling economy.
Along with just about every other commentator and market participant, we have been wondering in recent months how longer Treasuries would react to the Fed starting to raise rates at the same time the ECB and BoJ are pumping new money into their economies via QE.
In the wake of the soft-looking ADP employment report released on Wednesday, the true consensus for today's official payroll number likely is lower than the 230K reported in the Bloomberg survey. As we argued in the Monitor yesterday, though, we view ADP as a lagging indicator and we don't use it is as a forecasting tool.
Japan's unemployment rate returned unexpectedly to its 26-year low of 2.3% in February, falling from 2.5% in January.
We've had some correspondence questioning our view on the "weakness" of February hourly earnings, which we firmly believe were depressed by a persistent calendar quirk. Almost nine times in 10 over the past decade, when the 15th of the month has fallen after the week of the 12th--the payroll survey week--the monthly gain in wages has undershot the prior trend.
The headline April CPI, due today, will be boosted slightly by rising gasoline prices.
If the CPI measure of core consumer goods inflation were currently tracking the same measure in the PPI in the usual way, core CPI inflation would now be at 2.3%, rather than the 1.7% reported in November.
The CPI report due today will be released on schedule, because the Bureau of Labor Statistics, which compiles the data, remains open during the partial government shutdown.
Today brings the April PPI data, which likely will show core inflation creeping higher, with upward pressure in both good and services. The upside risk in the goods component is clear enough, as our first chart shows.
If Fed Chair Yellen's objective yesterday was to deliver studied ambiguity in her Testimony--and we believe it was--she succeeded. She offered plenty to both sides of the rate debate. For the hawks, she noted that unemployment is now "...in line with the median of FOMC participants' most recent estimates of its longer-run normal level", and that inflation is still expected to return to the 2% target, "...once oil and import prices stop falling".
The medium-term trend in the volume of mortgage applications turned up in early 2015, but progress has not been smooth. The trend in the MBA's purchase applications index has risen by about 40% from its late 2014 low, but the increase has been characterized by short bursts of rapid gains followed by periods of stability.
Our hopes of a hefty rebound in payrolls in October, following the hurricane-hit September number, have been dashed by the imminent landfall of Hurricane Michael in Florida panhandle.
Korea's labour market took an overdue breather in March after an extremely volatile start to the year.
Today brings a huge wave of data, but most market attention will be on the June CPI, following the run of unexpectedly soft core readings over the past three months.
To the extent that markets bother with the NFIB survey at all, most of the attention falls on the labor market numbers. But these data--hiring, compensation, jobs hard-to-fill--haven't changed much in recent months, and in any event most of them are released the week before the main survey, which appeared yesterday. The message from the labor data is unambiguous: Hiring remains very strong, employers are finding it very difficult to fill open positions, and compensation costs are accelerating.
Japan's Tankan survey continues to paint a picture of a contracting economy.
We would like to be able to argue with conviction that the surge in June housing starts and building permits represents the beginning of a renewed strong upward trend, but we think that's unlikely.
The average FICO credit score for successful mortgage applicants has risen in each of the past four months.
Don't bet the farm on today's October payroll numbers, which will be hopelessly--and unpredictably-- compromised by the impact of hurricanes Florence and Michael.
Yesterday's economic data in the Eurozone were soft.
We can't finalize our forecast for residential investment in the second quarter until we see the June home sales reports, due next week, but in the wake of yesterday's housing starts numbers we can be pretty sure that our estimate will be a bit below zero.
Korea's unemployment rate fell for a second straight month in October, inching down to 3.9%, from 4.0% in September.
We don't use the index of leading economic indicators as a forecasting tool. If it leads the pace of growth at all, it's not by much, and in recent years it has proved deeply unreliable.
The details of the substantial pay raises being offered to some 18K JP Morgan employees over the next three years are much less important than the signal sent by the company's response to the tightening labor market. In an economy with 144M people on payrolls, hefty raises for JP Morgan employees won't move the needle in the hourly earnings data.
Usually, we forecast existing home sales from the pending sales index, which captures sales at the point contracts are signed.
The New York Fed tweeted yesterday that "Housing market fundamentals appear strong.
Looking back at the numbers over the past few weeks, it is pretty clear that the gap between the strong payroll reports and the activity data widened to a chasm in the first quarter. We now expect GDP growth of about zero--the latest Atlanta Fed estimate is +0.3% and the New York Fed's new model points to 0.8%--but payrolls rose at an annualized 1.9% rate.
It would be easy to characterize the Fed as quite split at the July meeting.
The FOMC's view of the economic outlook and the likely required policy response, set out in yesterday's statement and Chair Yellen's press conference, could not be clearer.
Over the past couple of weeks, the number of applications for new mortgages to finance house purchase have reached their highest level since late 2010, when activity was boosted by the impending expiration of a time-limited tax credit for homebuyers.
In the wake of the unexpectedly weak September Empire State survey, released Monday, we are now very keen to see what today's Philadelphia Fed survey has to say.
A very light week for U.S. data concludes today with four economic reports, which likely will be mixed, relative to the consensus forecasts. The recent run of clear upside surprises and robust-looking headline numbers is likely over, for the most part.
You'd be hard-pressed to read the minutes of the September FOMC meeting and draw a conclusion other than that most policymakers are very comfortable with their forecasts of one more rate hike this year, and three next year.
The tone of Fed Chair Powell's opening comments at the press conference yesterday was much more dovish than the statement, which did little more than most analysts expected.
The consequences of the collapse in oil prices continue to reverberate through the sector. The number of rigs in operation is still falling rapidly, but the rate of decline is slowing. According to data from Baker Hughes, Inc., an average of 23 rigs per week have ceased operation over the past four weeks, the slowest decline since December.
The New York Times called the China trade agreement reached Friday "half a deal", but that's absurdly generous.
Today's labour market figures likely will show that the Brexit vote has inflicted only minimal damage on job prospects so far. The unemployment rate likely held steady at 4.9% in the three months to September, and the risk of a renewed fall in unemployment appears to be bigger than for a rise.
We want to be very clear about the terrible-looking December retail sales numbers: The core numbers were much less bad than the headline, and there is no reason to think the dip in the core is anything other than noise.
The 0.8% jump in nominal November retail sales is consistent with a 0.4% rise in real total consumption, which in turn suggests that the fourth quarter as a whole is likely to see a near-3% annualized gain.
So, what should we make of the fourth straight disappointment in the retail sales numbers? First, we should note that all is probably not how it seems. The 0.2% upward revision to March sales was exactly equal to the difference between the consensus forecast and the initial estimate, neatly illustrating the danger of over-interpreting the first estimates of the data.
After five straight undershoots to consensus, with the core CPI averaging monthly gains of just 0.05%, investors are asking hard questions about the Fed's belief -- and ours -- that core inflation is headed towards 2% in the not-too-distant future.
Our view on the trade data last week was that U.S. tariff hikes have caused minimal damage, so far. China's tariff increases on imports to date have resulted in stockpiling, with little evidence in the CPI of any inflationary pressure.
Tariffs are a tax on imported goods, and higher taxes depress growth, other things equal.
The Mexican labor market has remained relatively healthy in recent months, despite many external and domestic headwinds. Formal employment has increased by 2.1% year-to-date and by 3½% in the year to July, according to the Mexican Social Security Institute.
The long-awaited decisive upturn in wage growth still hasn't emerged. Year-over-year growth in average weekly wages, excluding bonuses, held steady at 2.6% in May.
The declines in headline housing starts and building permits in June don't matter; both were depressed by declines in the wildly volatile multi-family components.
The GM strike will make itself felt in the September industrial production data, due today.
The Monetary Policy Board of the Bank of Korea voted yesterday to lower its policy base rate to 1.25%, from 1.50%.
The rate of growth of real personal incomes is under sustained downward pressure, slowing to 2.1% year-over-year in December from 3.4% in the year to December 2015. In January, we think real income growth will dip below 2%, thanks to the spike in the headline CPI, reported Wednesday. Our first chart shows that the 0.6% increase in the index likely will translate into a 0.5% jump in the PCE deflator, generating the first month-to-month decline in real incomes since January last year.
Some of the recent labor market data appear contradictory. For example, the official JOLTS measure of the number of job openings has spiked to an all-time high, and the number of openings is now greater than the number of unemployed people, for the first time since the data series begins, in 2001.
The declines in headline housing starts and building permits in September don't matter; both were driven by corrections in the volatile multi-family sector.
Chief U.S. Economist Ian Shepherdson on U.S. payroll gains
In one line: Spectacular but unsustainable.
The headline payroll number each month is the difference between the flow of gross hirings and the flow of gross firings. The JOLTS report provides both numbers, with a lag, but we can track the firing side of the equation via the jobless claims numbers. Claims are volatile week-to-week, thanks to the impossibility of ironing out every seasonal fluctuation in such short-term data, but the underlying trend is an accurate measure. The claims data are based on an actual count of all the people making claims, not a sample survey like most other data. That means you'll never be blindsided by outrageous revisions, turning the story upside-down.
On Thursday morning, we'll get the best-performing indicator of the US labor market: initial jobless claims. For a while now, Pantheon Macroeconomics' Ian Shepherdson has been stressing that the weekly print is noisy, particularly with the volatility the end-of-year season brings
Mr. Trump's partial U-turn on September tariffs shows some semblance of an understanding of reality...that's a good thing. China's industrial production crushes June hopes of a swift recovery. Chinese consumers struggle. Chinese FAI: the infrastructure industry growth slowdown is especially worrying. Japan's strong core machine orders rebound in June probably faded in recent weeks. Korea's jobless rate will soon creep back up after remaining steady in July.
Yesterday's surprising decline in the Eurozone unemployment rate adds further evidence to the story of a slowly healing economy. The rate of joblessness fell to 10.9% in July from 11.1% in June, the lowest since the beginning of 2012, mainly driven by a 0.5 percentage point fall in Italy, and improvement in Spain, where unemployment fell 0.2 pp to 22.2%.
Unemployment in France remains high, but the trend is turning. The mainland rate of joblessness fell to a five-year low of 8.6% in Q4, and yesterday's employment report continued the good news.
The underlying trend in payroll growth is running at about 225K-to-250K, perhaps more, and the leading indicators we follow suggest that's a reasonable starting point for our December forecast. The trend in jobless claims is extraordinarily low and stable--the week-to-week volatility is eye-catching, especially over the holidays, but unimportant--and indicators of hiring remain robust. The unusually warm weather in the eastern half of the country between the November and December survey weeks also likely will give payrolls a small nudge upwards, with construction likely the key beneficiary, as in November.
You may have seen the chart below, which shows what appears to be an alarming divergence between the official jobless claims numbers and the Challenger survey's measure of job cut announcements. We should say at the outset that the chart makes the fundamental mistake of comparing the unadjusted Challenger data with the seasonally adjusted claims data.
We argued in the Monitor yesterday that the very low and declining level of jobless claims is a good indicator that businesses were not much bothered by the slowdown in the pace of economic growth in the first quarter. The numbers also help illustrate another key point when thinking about the current state of the economy and, in particular, the rollover in the oil business.
Now that the holidays are just a distant memory, the distortions they cause in an array of economic data are fading. The problems are particularly acute in the weekly data -- mortgage applications, chainstore sales and jobless claims -- because Christmas Day falls on a different day of the week each year.
Japan's jobless rate inched up to 2.5% in January, from 2.4% in December.
Youth unemployment remains a blemish on the Eurozone economy, despite an increasingly resilient cyclical recovery. The unemployment rate for young workers aged 15-to-24 years stood at 18.4% at the end of April, chiefly due to high joblessness in the periphery.
German labour market data continue to break records on a monthly basis. The unemployment rate was unchanged at 6.2% in A pril, with jobless claims falling 16,000, following a revised 2,000 fall in March. March employment rose 1.2% year-over-year, down slightly from 1.3% in February, but the total number of people in jobs rose to a new high of 43.4 million.
Any model of payrolls based on the usual indicators--jobless claims, ISM hiring, NFIB hiring, and other sundry surveys--right now points to payroll growth at 250K or better. Indeed, the ISM non-manufacturing report on Wednesday is consistent with payroll growth closer to 400K, and the lagged NFIB hiring intentions number points to 300K. Yet the consensus forecast for today's October report is just 182K. Why so timid?
The models which generate the ADP measure of private payrolls will benefit in May from the strength of the headline industrial production, business sales and jobless claims numbers.
We're expecting to see November payrolls up by about 200K this morning, but our forecast takes into account the likelihood that the initial reading will be revised up. In the five years through 2014, the first estimate of November payrolls was revised up by an average of 73K by the time o f the third estimate. Our forecast for today, therefore, is consistent with our view that the underlying trend in payrolls is 250K-plus. That's the message of the very low level of jobless claims, and the strength of all surveys of hiring, with the exception of the depressed ISM manufacturing employment index. Manufacturing accounts for only 9% of payrolls, though, so this just doesn't matter.
In the wake of the ADP report released Wednesday, we moved up our payroll forecast to 150K from 100K, but we've now taken a closer look at the post-Florence path of jobless claims.
Senior International Economist Andres Abadia on Chile's jobless rate
Chief Eurozone Economist Claus Vistesen on the latest German consumer figures
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